Cutting through the foam of Maryland's beer controversy

The purpose of Maryland’s regulation of the alcohol industry is “for the protection, health, welfare, and safety of the people of the state,” and it is for that reason only that state law justifies policies to “displace or limit economic competition.” Under that rubric, it should be fairly easy for lawmakers to establish that elements of the legislation approved last year to change the rules for the craft brewery industry fall short and should be amended. Heck, the entire three-tier system of regulation that divides the industry between producers, distributors and retailers, the rules prohibiting alcohol sales at grocery stores, the blue laws that typically prevent retail sales on Sundays could all use a thorough review. In some respects, the rules are too lax to protect the public welfare, for example in some communities where an over-profusion of liquor stores contributes to crime and poor health. In other respects, the laws serve no apparent purpose other than to safeguard vested economic interests to the detriment of potential entrepreneurs and consumers. We ought to be able to have a thoughtful conversation, 84 years after the end of Prohibition, about what rules would best achieve the state’s goals.

Unfortunately, that’s not what’s about to happen in Annapolis. Comptroller Peter Franchot is poised to push a “12-pack” of proposals brewed up by his “Reform on Tap” task force during the past year, all of them designed to foster the growth of the craft beer industry in the state. It’s a goal we support from an economic development perspective, but the process by which we’ve gotten here is problematic. Reforming Maryland’s liquor laws is never an easy prospect, given the clout the industry has traditionally wielded in Annapolis and the fervor with which it has protected the status quo, and the way Mr. Franchot has approached the issue has made the job that much harder. The general lack of input into the process by the public health community is a clear flaw and robs his proposals of some needed moral authority. And questions about whether the state’s chief alcohol regulator ought to be so heavily engaged in an effort to boost one part of the industry rather than others are legitimate. But most of all, the degree to which Mr. Franchot has openly accused legislative leaders of acting in bad faith on this issue probably dooms his effort on political grounds.

Which is a shame, since from a policy perspective, he makes some extremely valid points.

The most blatant absurdity of last year’s brewery bill, which was crafted in an attempt to help Guinness open a taproom in Arbutus, is a provision that forces brewers to buy back their own beer from distributors to sell in their own facilities. The legislation increases the limit on the number of barrels of beer brewers can serve in taprooms from 500 to 2,000 — a key concession that makes the Guinness facility possible. If taprooms want to sell another 1,000 barrels, they can, but only if they load it onto trucks and ship it to a distributor who then must unload it in a warehouse, re-load it onto at truck, ship it back to the brewer, charge a mark-up and unload it. Can anyone begin to claim this protects the public health and welfare? No. But it does protect the revenues of distributors. It has to go.

The 2017 legislation also requires that any new taprooms in the state close by 10 p.m. That’s a clear attempt to limit the degree to which taprooms compete with bars and taverns, but Mr. Franchot is right to recommend that such decisions be left up to local liquor boards. They’re the ones who understand the conditions of their communities. The comptroller is also right to propose changes to the state’s limits on contract brewing. Because of the start-up costs inherent in the industry, new brewers often start out by contracting with more established producers to actually manufacture their recipes. The state’s new cap on how much contract-produced beer can be sold in a taproom will make it much harder for new companies to enter the industry. It should be changed as well.

Other elements of Mr. Franchot’s package center on important issues, such as the strange franchise laws that bind manufacturers to distributors and override ordinary contract law, but finding the right reforms will require careful balancing.

Unfortunately, that kind of careful consideration by policymakers looks extremely unlikely at a moment. Maryland liquor laws have been overly politicized for decades, and Mr. Franchot, with his beer-glass-raised denunciations of his fellow Democrats as stooges, has succeeded in making it more so. That may be good for his brand as a maverick and a populist, but it risks hurting those brewers he’s ostensibly trying to help.

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